CAN A BASE LAYER NBFC ISSUE PREFERENCE SHARES?
IF YES, THEN WHICH TYPE?
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PREFERENCE SHARES - NBFC
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Quick Summary
Yes, a base layer NBFC (Non-Banking Financial Company) can issue preference shares. However, there are certain restrictions and guidelines that apply:
1. _Type of Preference Shares_: NBFCs can issue only non-convertible preference shares (NCPs) or redeemable preference shares.
2. _Approval_: The issue of preference shares requires approval from the Reserve Bank of India (RBI).
3. _Compliance_: NBFCs must comply with the RBI's guidelines and regulations, including the NBFC (Issuance of Preference Shares) Directions, 2016.
4. _Priority_: Preference shares have a higher claim on assets and dividends than equity shares but rank below debt.
5. _Redemption_: Redeemable preference shares must be redeemed within a specified period, typically 5-10 years.
6. _Dividend_: Dividends on preference shares are tax-deductible, but NBFCs must ensure compliance with the applicable tax laws.
IS THERE A LIMIT TO ISSUE PREFERENCE SHARES IN ABOVE CASE?
AND CAN YOU SHARE THE LINK OF THESE MASTER DIRECTIONS?
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